What is his elasticity of demand with respect to total price

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Assignment:

Scotty Heinz lives at 4800 Forbes Avenue in Pittsburgh, PA. Scotty must go to the doctor for a visit. The trip takes 30 minutes each way (1 hour total). The pecuniary cost of the travel (gas, parking) is $10. He waits 20 minutes to see the doctor (must be a Pitt grad . . . ), and spends 10 minutes with the doctor. The price of the doctor visit is $80. Scotty has a coinsurance rate of 0.5. The opportunity cost of his time is $20 per hour (college mascots are woefully underpaid).

(a) What is the "Total Price" of his visit (sum of money and time costs)?

(b) Scotty's demand curve is described by M = 30 -0.2 ×Total Price

i. What is his elasticity of demand with respect to the Total Price?

ii. What is his elasticity of demand with respect to the price of the doctor visit?

iii. What is his elasticity of demand with respect to the coinsurance rate?

iv. What is his elasticity of demand with respect to time?

(c) Assume that the price of the doctor visit ($80) equals the marginal cost of production. Given Scotty's demand curve, the price of a doctor visit, and the coinsurance rate, what is the deadweight loss due to moral hazard from health insurance?

Reference no: EM133285445

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